An Analysis of State-Local Government Capital Expenditure During the 2000s

Abstract

Capital expenditure by subnational governments in the United States represents about two percent of GDP and 12 percent of state-local spending. Persistent differences among states exist in the amount and composition of this capital expenditure. This regression-based research examines for the decade of the 2000s: (1) the factors affecting capital spending and interstate differences; (2) the effect of recessions; (3) the response to American Recovery and Reinvestment Act (ARRA) stimulus funds; (4) state and year fixed effects; and (5) investment for highways and K-12 education. Aggregate capital expenditure is relatively stable, although it increased around recessions, with ARRA grants especially important and substantial state-specific influences.